Loan = money you are borrowing. Referred to as “debt finance” because you need to repay it.

Lender = usually a bank or building society. Non-bank lending is often within the social-enterprise sector.

Principal = the sum of money borrowed.

Interest = a fee charged by the lender to the borrower for the use of the money borrowed. This is usually described in terms of APR [annual percentage rate].

Risk = an assessment of factors that might cause the business to fail and leave the debt unpaid. This is taken into account in determining the interest rate.

Secured lending = lenders reduce risk by requiring the loan to be secured by some or all of the business’s assets (or personal assets). They can make a claim on those assets if the business fails and you can’t pay the loan back.

Unsecured lending = with an unsecured loan the lender has no claim on assets, they can only hold you to account for the money you’ve borrowed. This is much higher risk to them.

Collateral = personal or business assets that can be use to pay back money.

Capital = the tangible assets used to run business and generate profit, e.g. your cameras if you’re a video-production company.

Credit history = record of individual or company repayment behaviour. Bad credit history can affect your ability to borrow money in the future.